Visa Stock To Beat The Earnings Consensus In Q4?

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Visa

Visa (NYSE: V) is scheduled to report its fiscal Q4 2022 results on Tuesday, October 25, 2022. We expect Visa to beat the consensus estimates of earnings, while revenues will remain in line (just above) with the expectations. The world’s largest global electronic payment solutions provider surpassed the street estimates in the last quarter, with net revenues (total revenues minus client incentives) increasing 19% y-o-y to $7.3 billion. It was mainly driven by a 14% y-o-y rise in nominal payments volume, a 16% increase in the number of processed transactions, and a 38% jump in the cross-border volumes. We expect the same trend to continue in the fourth quarter (FY Oct-Sept).

Our forecast indicates that Visa’s valuation is $261 per share, which is 40% above the current market price of $187. Our interactive dashboard analysis on Visa’s Earnings Preview has more details. 

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(1) Revenues expected to remain in line (just above) with the consensus estimates

Visa’s revenues (net revenues) increased 23% y-o-y to $21.5 billion in the first three-quarters of FY2022. 

  • The Data processing revenues grew 14% y-o-y in the first nine months of FY2022, driven by a 19% rise in the number of processed transactions. We expect the fourth-quarter results to be on similar lines.
  • The Services revenue increased 19% over the same period, because of an 18% improvement in the nominal payments volume. We expect the same trend to follow in the fourth quarter.
  • The International transactions revenues suffered in FY2021 due to the Covid-19 crisis. However, it increased 50% y-o-y in the first three quarters because of a 42% jump in the cross-border volumes. We expect it to further grow in the fourth quarter.
  • Overall, we estimate Visa’s net revenues to remain around $29.1 billion for FY2022.

Trefis estimates Visa’s fiscal Q4 2022 revenues to be around $7.57 billion, in line with the $7.55 billion consensus estimate. 

2) EPS is likely to beat the consensus estimates

Visa Q4 2022 adjusted earnings per share (EPS) is expected to be $1.94 per Trefis analysis, 4% above the consensus estimate of $1.87. The company’s net income improved 26% y-o-y to $11 billion in the first nine months of 2022 driven by positive growth in the top line. We expect the same momentum to continue in the fourth quarter. Overall, Visa is likely to report a net income of $15.3 billion and an annual GAAP EPS of $7.22 in FY 2022.

(3) Stock price estimate is 40% above the current market price

We arrive at Visa’s valuation, using an EPS estimate of around $7.22 and a P/E multiple of just above 36x in fiscal 2022. This translates into a price of $261, which is 40% above the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

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 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 V Return 5% -14% 140%
 S&P 500 Return 4% -22% 66%
 Trefis Multi-Strategy Portfolio 3% -24% 201%

[1] Month-to-date and year-to-date as of 10/19/2022
[2] Cumulative total returns since the end of 2016

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